Editor’s note: This post has been updated to include KCRHA’s responses.

By Erica C. Barnett

Clark Nuber, the firm that conducted a damning forensic evaluation of the King County Regional Homelessness Authority in April, has responded to the agency’s “corrective action plan” (or CAP) with an equally scathing assessment that lays out seven “red flags” that, according to the auditors, the homelessness agency failed to address in its plan to correct systemic financial issues.

The CAP, Clark Nuber wrote, completely ignored several directives from the city and King County, including orders to put a freeze on hiring and spending, and relies on “trust us” assurances that the KCRHA will fix other serious deficiencies. Given the KCRHA’s repeated failure to meet its prior commitments, “funders should not rely exclusively on KCRHA’s self-reported progress,” the auditors wrote. The plan includes “pervasive use of potential hedge language, like: “‘has begun,’ ‘has initiated,’ and ‘will include'” throughout, the assessment found.

“KCRHA also agrees that progress should be independently verified,” a KCRhA spokesperson said. “That is why the CAP itself recommended external stabilization support, and why we welcome the City and County’s intent to embed external financial expertise to support validation, documentation, and implementation. KCRHA is not asking funders or the public to rely on management assurances alone.”

The KCRHA, Clark Nuber found, also continues to insist—inaccurately—that its deficit (currently around $65 million, up from $45 million last July) is the inevitable result of its funding structure, in which the agency pays homelessness nonprofits and gets reimbursed by the city and county. Many large nonprofit and quasi-governmental organizations use reimbursement-based systems, the auditors pointed out, without the kind of steadily increasing negative balance KCRHA has experienced.

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“[The deficit grew steadily and consistently over time, which is the signature of a management process failure rather than an external shock or an inherent feature of reimbursable funding,” the evaluation found. One of the main issues, the auditors wrote, is that KCRHA has routinely submitted invoices late—up to 16 months—which has prevented the agency from getting reimbursed on time.

The KCRHA spokesperson said the agency “accepts responsibility for internal weaknesses that contributed to the problem” of negative balances. “Those are within KCRHA’s control and are being addressed through the CAP. At the same time, resolving the interest obligation and preventing recurrence will require coordinated work with funders on reimbursement timing, advances, working-capital structure, and treatment of accrued interest.”

The “root causes” of the negative balance “included internal factors: the absence of a formal monthly close process, inconsistent invoice preparation and submission, a lack of real-time cash monitoring, inadequate budget oversight, and insufficient internal controls,” the auditors wrote. “These are organizational management weaknesses, not consequences of the funding model itself.”

Overall, Clark Nuber found that the corrective action plan had not fully met any of seven “key dimensions” laid out in the forensic audit, including “KCRHA understanding of issues,” “achievability,” “accountability,” and risk.

Additionally, they said, the corrective plan says nothing about $6.4 million in  overspending on programs—”the most significant omission in the CAP”—and the growing amount of interest it owes the King County Investment Pool, from which it routinely borrows money. As we noted in our initial coverage, the $6.4 million is on top of $8 million in spending the KCRHA could not account for, $4 million in administrative overspending, and $1.26 million in interest that is “still growing.”

The KCRHA spokesperson said the agency already addressed the $6.4 million in overspending in late 2025 and early 2026.

Clark Nuber also noted that the KCRHA has put off establishing internal financial controls until the far-off Phase 3 of the plan, even though these controls are “not an aspirational best practice,” but required by federal law. “This means KCRHA will be administering significant public funds, including federal awards, without the required control structure throughout the period that is supposed to represent its most intensive corrective action effort.”

The report includes ten short-, medium-, and long-term recommendations for the city and county. It’s unclear whether either government will take the auditors’ adivce to heart; ten days after Clark Nuber published its report, Seattle Mayor Katie Wilson and King County Executive Girmay Zahilay jointly announced plans to “embed” (and pay for) an outside consultant to “ensure [the] corrective actions” in the KCRHA’s plan “are being implemented with urgency.”

Wilson’s office did not respond to questions Wednesday; Zahilay’s office referred us to his statement about the decision to hire a consultant. The new finance committee of KCRHA’s governing board—one of the steps outlined in the CAP—will meet Thursday morning at 10am.

By Erica C. Barnett

Mayor Katie Wilson and King County Executive Girmay Zahilay both announced that they plan to “embed an independent financial analyst” in the agency, as a statement from Wilson put it yesterday.

According to Zahilay’s announcement, “This analyst will provide more transparency into financial practices, improve payment processes, and ensure corrective actions are being implemented with urgency.” Wilson’s announcement referred to the analyst (or analysts) as “a financial services team” that will “shore up financial and internal controls at KCRHA.”

The decision came after a flurry of discussions late last week about how to respond to the KCRHA’s “corrective action plan,” which laid out a series of steps to respond to a damning audit that found the agency lacked basic financial controls, overspent its administrative budget, and could not account for $8 million in spending. The audit also found that KCRHA had a consistent and growing negative budget balance—around $45 million when the audit concluded, an amount that had increased to $65 million by the time the auditors presented their results.

The announcement represented a slowdown of what had been growing momentum to “wind down” the agency quickly and send the contracts it manages back to the city and county agencies that used to oversee them. It was also a reversal of a plan set in motion last week.

As recently as last Friday, Wilson and Zahilay were planning to announce on Monday that they were taking back the homelessness contracts and distributing them to the city’s Human Services Department and King County’s Department of Community and Human Services,  according to accounts from people familiar with the discussions. (Zahilay, rather than Wilson, was reportedly leading the charge to pull the plug). Homeless advocates, city council members, and some members of the business and philanthropic community reportedly urged caution, and cooler heads apparently prevailed.

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Under the scenario the city and county were contemplating last week, the KCRHA would continue to exist—at least temporarily—as a shell of itself, serving as the region’s Continuum of Care for federal funding purposes and administering the Point In Time Count of the region’s homeless population.

This may still happen; the decision to fund an accounting team to address the problems identified in the audit does not preclude shutting down the agency. But as of now, that will no longer happen on an accelerated timeline.

As we reported last week, KCRHA CEO Kelly Kinnison and Associate Deputy for Strategy William Towey have asked for $500,000 to hire a fnancial consultant—as Kinnison put it, a “CFO-type role”— through the staffing firm Robert Half, which charges hefty recruitment fees on top of their temporary staffers’ salaries. The KCRHA laid off its most recent chief financial office last October and never replaced him.

A spokesperson for Zahilay’s office said the county does not know yet how much the consultant will cost or how the city and county will split the spending.

Wilson’s office did not respond to questions.

By Erica C. Barnett

In a “corrective action plan” issued last Friday, the King County Regional Homelessness Authority laid out the steps it proposes taking to improve its accounting practices and financial oversight after a damning forensic audit called both into question last month.

While the 157-page proposal “acknowledges” past failures, including significant issues such as overspending and sloppy accounting, it also argues that that some of the most significant issues, including a consistent negative cash balance, rest largely at the feet of King County and the city of Seattle, the agency’s two primary funders.

“Where findings involve shared workflows between KCRHA, the City, and the County, KCRHA is identifying those as shared operating-model issues requiring joint correction,” the plan says. Specifically, the plan blames an “early operating model” that “did not provide sufficiently mature shared structures for reconciliation, reimbursement timing, advance management, invoice review, funding changes, financial reporting expectations, and escalation.”

“KCRHA’s internal failures must be corrected. But the region must also establish a stronger operating framework among KCRHA, the City of Seattle, and King County.”

Th forensic evaluation, by the auditing firm Clark Nuber, found that the agency could not account for around $8 million in funds it was supposed to have, overspent its administrative budget by $4 million, and had failed to budget for $1.26 million in interest on loans from King County.

In addition, the audit found, the KCRHA appeared to have commingled funds that were contractually earmarked for specific purposes, failed to segregate financial duties among different employees, and relied on casual financial practices and “institutional knowledge” to account for spending and balance its budget, including Excel spreadsheets that showed “thousands” of edits by various people who had access to budget documents.

The audit also found the agency was operating with a a negative cash balance of around $45 million as of last July—an amount that had increased to $63 million by March. KCRHA has long blamed this recurring shortfall on its “reimbursement-based” structure: The agency pays providers and waits for the county and city to reimburse it for what it spends, requiring it to take out loans from the King County Investment Pool (KCIP) while it waits for payments.

However, an auditor with Clark Nuber said last month that this structure alone couldn’t account for the agency’s erratic and increasing negative cash balance, noting that many other agencies use a similar structure without incurring negative balances that just seem to “grow, grow, grow.”

Additionally, the audit found lax oversight of how employees used and distributed “cash equivalent” funds such as gift cards to people who participated in interviews for the KCRHA’s Point In Time Count (a data-based extrapolation that replaced an actual count several years ago) and purchase cards, or “P-Cards,” which employees could use like credit cards.

“KCRHA accepts responsibility for correcting its internal deficiencies,” Kinnison wrote in a memo to Mayor Katie Wilson and King County Executive Girmay Zahilay that accompanied the plan. “At the same time, several of the highest-priority issues — including reimbursement timing, fund advances, [King County Investment Pool] exposure, backend funding adjustments, invoice review workflows, and administrative funding structure — cross organizational boundaries. Durable resolution will require active partnership by KCRHA, the City of Seattle, and King County. KCRHA owns its internal failures; the region must jointly fix the shared operating model.”

The proposal (which, as an aside, includes many similar bullet-pointed lists and identical repetitions that suggest it may have been written with help from AI) lays out steps the agency will take to address the issues identified in the audit and improve its budgeting and financial practices.

These include identifying the $8 million in “missing” funds; increasing controls on employees’ use of cash equivalents like purchase cards; doing monthly budget closeouts; and working to segregate budget duties so that the same person is not responsible for approving an expenditure and certifying that the money was spent appropriately, for instance.

KCRHA is asking the county and city for additional funds to implement the plan, which Clark Nuber principal Mike Nurse estimated could take a year or more and cost millions of dollars. The plan says the KCRHA’s ownfinancial staff are already stretched too thin to take on the complex work involved in fixing all the deficiencies the auditors identified. “KCRHA does not currently have sufficient internal capacity or specialized technical capability to complete this body of work at the pace and confidence level required by the current environment without additional support,” the proposal says.

Additional funding could pay for new staff and temporary help, such as a “highly qualified interim CFO,” “a small technical finance and accounting team,” or “an outside consulting firm.”

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As we reported at the time, Kinnison laid off the KCRHA’s last chief financial officer in October as a cost-saving measure and has not replaced him. The corrective action plan frames this choice, which Kinnison said at the time was “due to our budget shortfall,” as a prudent financial decision made after “current executive leadership determined that the organization first needed to better understand the scope of deficiencies, the structure of required remediation, and the qualifications needed for future-state finance leadership.”

The cost savings from laying off the CFO and 12 other staffers, including the agency’s general counsel, were offset by the decision to spend millions of dollars on temp workers from outside agencies, which charge hefty fees on top of each worker’s take-home pay. Temporary financial staffers from the Robert Half agency, hired between 2023 and 2025, cost the KCRHA as much as $150 an hour, the equivalent of more than $300,000 a year.  The KCRHA used other staffing firms to provide temporary staff to do routine administrative work, like administering grants and contracts, according to contracts PubliCola has reviewed.

Other high-dollar items between 2023 and 2024 included more than half a million dollars for legal services, nearly $64,000 for PR and communication firms, and $167,000 to a company called U-Need Accounting.

It’s unclear whether city and county officials will hand over additional funding to address the problems outlined in the audit, or how much. After the recent KCRHA board meeting about the audit findings, local elected officials and board members began discussing ways to thoughtfully “wind down” the agency without interrupting services or unnecessarily risking the loss of state and already shaky federal funds.

At a governing board meeting before the KCRHA issued its report last week, King County Executive Girmay Zahilay cautioned, “I know that there have been a lot of calls to dismantle the organization and do things of that nature, but we understand that first and foremost, we have to make sure that our providers, who are out there doing that work, get paid. We have to make sure that we have an entity that can receive those critical federal resources. … Right now, we can’t jeopardize tens of millions of dollars that go into this system during this time.”

Seattle Mayor Katie Wilson said little at that meeting; earlier this month, she told PubliCola that the agency’s initial response to the audit “did not adequately address my concerns.”

The corrective action plan acknowledges that the agency could cease to exist in the future, cautioning that a lot has to happen in any “transition” to a different structure. In addition to overseeing contracts and paying providers, the KCRHA functions as the Continuum of Care for the region, meaning it’s the only entity currently authorized to receive federal homelessness funds. It also oversees the region’s Homeless Management Information System, a central database that tracks every person who receives homeless services in the region, and conducts the annual Point In Time Count.

By Erica C. Barnett

Mayor Katie Wilson told PubliCola she is dissatisfied with the King County Regional Homelessness Authority’s five-page response to an April 22 letter, sent jointly with King County Executive Girmay Zahilay, directing the agency to come up with a written plan to address five “high-risk” findings from a recent forensic audit.

KCRHA’s response, Wilson said, “did not adequately address my concerns regarding management of City funds, particularly regarding invoicing problems and negative cash balances. All options remain on the table as we await KCRHA’s full corrective action plan.”

The audit found that the KCRHA could not account for $8 million in public funds, and had overspent its administrative budget by $4 million; on top of that, the homelessness agency owes King County around $1.26 million in interest on loans that is not covered by its current budget. Wilson and Zahilay gave the agency until last Friday, May 8, to provide a written plan, including:

“A strategy with a detailed timeline outlining how the KCRHA is going to address issues related to unreconcilable and unrecoverable cash”—the entire $13 million;

“Details of immediate action” to ensure that reimbursements for KCRHA employee spending is pre-approved and documented. According to the audit, there were a number of odd-looking reimbursements, including more than $9,000 in lodging costs for an interim chief financial officer, that weren’t explained, and in general, reimbursements “did not have necessary approval and/or supporting documentation as required by governing policies”;

Immediate actions to ensure gift cards distributed to homeless people during the “point in time count,” which now consists of interviews and a data analysis, are documented and tracked, which they have not been in the past;

A plan to ensure “segregation of duties” for expenditures. Currently, the same person can approve an expenditure, make changes in the KCRHA’s accounting system, and verify that an expenditure was appropriate; and

Actions the agency is taking to control employees’ use of cash-equivalent “purchase cards,” which the audit found have been used by various employees for purchases that weren’t clearly documented, making it difficult or impossible to know if they were legitimate.

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The KCRHA’s response, signed by strategic director William Towey, continues to blame many of the agency’s financial shortcomings, including its ongoing negative balances and the “missing” $8 million, on the fact that it operates on a reimbursement model, meaning that the agencies pays nonprofit homeless service providers before its funders—the city and the county—reimburse them, resulting in periodic negative balances. The audit found that this model doesn’t account for the KCHRA’s financial problems; since it came out, the KCRHA went tens of millions more into the red.

In the letter, Towey also said the KCRHA is working to address other issues flagged by the city and county, by tightening expense reporting rules, working to segregate staff duties to the extent possible, requiring better documentation of purchase and gift cards, and reconciling the budget to address the outstanding $8 million balance, which the auditors said may have to be “written off” if KCRHA can’t account for it.